Unfair Trade Practices Philippine Experience Josef T

Unfair Trade Practices – Philippine Experience Josef T. Yap 11 March 2011

Some data on the Philippine Economy

Competitiveness Indicators Ease of Doing Business Economy 2010 Rank Out of 183 Singapore 1 Thailand 12 Malaysia 23 China 89 Viet Nam 93 Brunei 96 Indonesia 122 Philippines 144 Cambodia 145 Lao PDR 167 Source: World Bank Doing Business Report 2010.

Lack of Economic Transformation

Explaining the Performance of the Philippine Economy

Low Investment Rate a Key Factor

Literature • Toward a National Competition Policy for the Philippines. Edited by E. M. Medalla. PIDS: 2002. • “Assessing Competition in Philippine Markets, ” by R. M. Aldaba. PIDS Discussion Paper 2008 -23 (September 2008). • “The Role of the Private Sector in Regional Economic Integration: a View from the Philippines, ” by M. D. Rosellon and J. T. Yap. PIDS Discussion Paper 2010 -23 (October 2010).

Q: Is the private sector its own enemy? • Resistance to reform • Two groups in the private sector (Bocchi 2008) • Several examples of unfair trade practices: cement, airlines • Oligarchy and weak institutions are related • How to reform an oligarchy?

Example of Unfair Trade Practices • Cement - only 3 big firms and what they usually do is schedule their plant maintenance at the same time which affects the flow/delivery of cement. • Drugs - most mainstream physicians prescribe and support expensive branded drugs over the more affordable, but poorly perceived generic medicines. This tendency has been reinforced by the high promotion and gift-giving practices by drug companies to promote expensive branded medicines to physicians and pharmacists. This gift -giving behavior seems to be anti-competitive.

Example of Unfair Trade Practices • Airline Ø PAL has exclusive use of one terminal Ø PAL does not payment take-off and landing fees Ø PAL pays franchise tax of 2% of gross revenues, other airlines pay 5% • Ports – Philippine Ports Authority (PPA) has multiple roles—developer, operator, regulator— and this has resulted in conflict of interest

Regulatory Framework • Republic Act 3815 (1930): Revised Penal Code Ø Article 186 – defines and penalized monopolies and combinations in restraint of trade Ø Article 187 – penalties

Regulatory Framework • Republic Act 386 (1949): Civil Code of the Philippines Ø Allows collection of damages arising from unfair competition in agricultural, commercial, or industrial enterprises or labor Ø Civil code does not define unfair competition and merely lists the means by which it can be committed: force, intimidation, deceit, etc.

Proposed Legislation • 13 th Congress (2004 -07) Ø Philippine Anti-Trust Act of 2004 Ø Fair Trade Act of 2004 • 14 th Congress (2007 -2010) Ø Competition Act of 2009 Ø Anti-Trust Act of the Philippines • 15 th Congress (2010 to present) Ø Competition Act of 2010 Ø Fair Trace Act of 2010

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